Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points below your present rate? That might have been valid years ago, but with the fact that refinancing has been costing less over the last few years, it's never the wrong time to think about a new mortgage loan! Refinancing has various benefits that can make it worth the initial expenditure many times over.
You might be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage. You could also be able to "cash out" some of your equity, which you are able use to consolidate debt, add on to your home, or take a vacation. You might have the option to refinance to a shorter-term mortgage loan, enabling you to build up your equity quicker.
Expenses and Fees
As you probably know, you will have some fees and expenses during the process of refinancing. You'll have to pay the same types of expenses and fees as you did with your present mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might consider paying points to receive a reduced interest rate. The amount you'll save over the life of the loan could be substantial if you've paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on hear-say that the paid points can be deducted on your taxes.
Speaking of taxes, when your interest rate is reduced, naturally you'll also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at 701.222.0100.
In the end, for most people the total of up-front costs to refinance are paid back soon in monthly savings. We will help you figure out what mortgage program is the ideal fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing might effect your taxes. Call us at 701.222.0100 to get you started.
Want to know more about refinancing? Call us: 701.222.0100.